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Valparaiso Univ. Law School

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Monday, June 25, 2012

Jury Awards $6.08 Million to Developers in Suit Against San Jose

As reported here by the San Jose Mercury News, a Santa Clara County jury has awarded Silicon Valley developer Carl Berg $6.08 million in a breach of contract dispute against the City of San Jose for its failure to enact a timely planning process that would allow up to 5,200 homes to be built in the Evergreen area.  

Berg’s suit alleged that city officials let him and other Evergreen property owners to believe for four years that rezoning of their industrial property to residential property would be approved.  As a result, the owners agreed to pay the city $8.8 million to conduct a community planning process as part of their development applications.  However, in 2006, when Chuck Reed ran for mayor, Reed argued that the council should not approve the rezoning.  Reed wanted to preserve the land for potential industrial uses that would generate jobs and taxes for the city.  Ultimately, Reed won this argument, and in 2007 San Jose rejected the Evergreen zoning.  As reported by mercurynews.com, Berg commented that “there are inherent risks in getting development agreements processed by municipal agencies.”  According to Berg “the City of San Jose took the unique approach of creating a contract with us, asking for money up front, in exchange for expediting our applications.”  However, according to Berg, the City never even created a process for review of Berg's application, and on that basis the jury found that the City breached its agreement with Berg and thus should refund money paid by him and the other Evergreen property owners 

Mayor Reed likened the verdict to buying a car, driving it for a while, then asking to return it for a full refund.  Here, the City says it is being asked to return money for many services it already rendered through the Planning Department and consultants.  The City plans an appeal.

[JT and Christina Phillips]

 

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